Kemper Corporation (NYSE: KMPR) reported a net loss of $97.1 million, or $(1.52) per share, for the second quarter of 2023, compared to a net loss of $72.2 million, or $(1.13) per share, for the second quarter of 2022. Net loss for second quarter 2023 included a $45.5 million after-tax charge from the impairment of the goodwill asset related to the Preferred Property and Casualty Insurance segment.
Adjusted Consolidated Net Operating Loss1 was $16.9 million, or $(0.26) per share, for the second quarter of 2023, compared to Adjusted Consolidated Net Operating Loss1 of $37.2 million, or $(0.58) per share, for the second quarter of 2022.
Key themes of the quarter include:
- Specialty P&C reflects a six point Underlying Combined Ratio improvement
- Excess mortality at or near pre-pandemic levels
- Specialty Auto received second rate approval in California
“The benefits of the profit actions taken to date are starting to take hold and are generating notable improvements in our underlying performance,” said Joseph P. Lacher, Jr., President, CEO and Chairman. “We are increasingly confident these actions are driving the intended outcomes. Further, we are making significant progress on our key strategic initiatives including our reciprocal program, Bermuda optimization, expense initiatives and completion of our Kemper Personal Insurance review. In the second half of 2023, we anticipate continued improvement in underwriting performance. For 2024, we plan to generate a return on equity equal to or greater than 10%. I am deeply proud of the Kemper team and the efforts they have extended and continue to extend to enable these results.”
1 Non-GAAP financial measure. All Non-GAAP financial measures are denoted with footnote 1 throughout this release. See “Use of Non-GAAP Financial Measures” for additional information. | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
(Dollars in Millions, Except Per Share Amounts) (Unaudited) |
Jun 30,
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Jun 30,
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Jun 30,
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Jun 30,
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Net Loss | $ | (97.1 | ) | $ | (72.2 | ) | $ | (177.2 | ) | $ | (158.5 | ) | ||||
Adjusted Consolidated Net Operating Loss 1 | $ | (16.9 | ) | $ | (37.2 | ) | $ | (82.1 | ) | $ | (88.8 | ) | ||||
Impact of Catastrophe Losses and Related Loss Adjustment Expense (LAE) on Net Loss | $ | (31.2 | ) | $ | (23.9 | ) | $ | (51.7 | ) | $ | (34.9 | ) | ||||
Diluted Net Loss Per Share From: | ||||||||||||||||
Net Loss | $ | (1.52 | ) | $ | (1.13 | ) | $ | (2.77 | ) | $ | (2.49 | ) | ||||
Adjusted Consolidated Net Operating Loss1 | $ | (0.26 | ) | $ | (0.58 | ) | $ | (1.28 | ) | $ | (1.39 | ) | ||||
Impact of Catastrophe Losses and Related LAE on Net Loss Per Share | $ | (0.70 | ) | $ | (0.38 | ) | $ | (1.02 | ) | $ | (0.55 | ) | ||||
2 This press release recasts previously reported financial information for the provisions of Accounting Standards Update No. 2018-12, “Targeted Improvements to the Accounting for Long-Duration Contracts and related amendments” (“LDTI”) adopted as of January 1, 2023, with a transition date of January 1, 2021 under the modified retrospective method. | ||||||||||||||||
Revenues
Total revenues for the second quarter of 2023 decreased $154.9 million, or 10.9 percent, to $1,262.8 million, compared to the second quarter of 2022, mostly driven by $111.4 million of lower Specialty P&C earned premiums due to a decrease in new business resulting from targeted underwriting actions to improve profitability, partially offset by higher average earned premium per exposure from rate increases. The decrease in total revenues was also driven by $41.8 million of lower Life & Health earned premiums mostly due to the disposition of Kemper Health that was completed in December 2022, and a $25.4 million increase in Net Realized Investment Losses, partially offset by favorable changes in the Change in Fair Value of Equity and Convertible Securities from second quarter of 2022.
Segment Results
Unless otherwise noted, (i) the segment results discussed below are presented on an after-tax basis, (ii) prior-year development includes both catastrophe and non-catastrophe losses and LAE, (iii) catastrophe losses and LAE exclude the impact of prior-year development, (iv) loss ratio includes loss and LAE, and (v) all comparisons are made to the prior year quarter unless otherwise stated.
Three Months Ended | Six Months Ended | |||||||||||||||
(Dollars in Millions) (Unaudited) |
Jun 30,
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Jun 30,
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Jun 30,
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Jun 30,
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Segment Net Operating (Loss) Income: | ||||||||||||||||
Specialty Property & Casualty Insurance | $ | (10.8 | ) | $ | (38.9 | ) | $ | (69.2 | ) | $ | (83.6 | ) | ||||
Preferred Property & Casualty Insurance | (2.7 | ) | (16.8 | ) | (12.2 | ) | (22.9 | ) | ||||||||
Life & Health Insurance | 8.9 | 20.2 | 22.1 | 31.8 | ||||||||||||
Total Segment Net Operating Loss | (4.6 | ) | (35.5 | ) | (59.3 | ) | (74.7 | ) | ||||||||
Corporate and Other Net Operating Loss | (12.3 | ) | (1.7 | ) | (22.8 | ) | (14.1 | ) | ||||||||
Adjusted Consolidated Net Operating Loss1 | (16.9 | ) | (37.2 | ) | (82.1 | ) | (88.8 | ) | ||||||||
Net Income (Loss) From: | ||||||||||||||||
Change in Fair Value of Equity and Convertible Securities | 1.9 | (32.0 | ) | 3.2 | (54.3 | ) | ||||||||||
Net Realized Investment (Losses) Gains | (12.5 | ) | 8.7 | (7.4 | ) | 9.9 | ||||||||||
Impairment (Losses) Gains | (0.8 | ) | (3.9 | ) | 0.9 | (10.9 | ) | |||||||||
Acquisition and Disposition Related Transaction, Integration, Restructuring and Other Costs | (23.3 | ) | (7.8 | ) | (46.3 | ) | (11.5 | ) | ||||||||
Loss from Early Extinguishment of Debt | — | — | — | (2.9 | ) | |||||||||||
Goodwill Impairment Charge | (45.5 | ) | — | (45.5 | ) | — | ||||||||||
Net Loss | $ | (97.1 | ) | $ | (72.2 | ) | $ | (177.2 | ) | $ | (158.5 | ) | ||||
The Specialty Property and Casualty Insurance segment reported net operating loss of $10.8 million for the second quarter of 2023, compared to net operating loss of $38.9 million in the second quarter of 2022. Results improved due primarily to a lower underlying loss ratio, partially offset by adverse prior year loss and LAE development and higher catastrophe losses. The segment’s Underlying Combined Ratio1 was 102.0 percent, compared to 108.8 percent in the second quarter of 2022. The improvement was primarily driven by higher average earned premiums per exposure resulting from rate increases and lower underlying claim frequency.
The Preferred Property and Casualty Insurance segment reported net operating loss of $2.7 million for the second quarter of 2023, compared to a net operating loss of $16.8 million in the second quarter of 2022. Results improved due primarily to a lower underlying loss ratio. The segment’s Underlying Combined Ratio1 was 95.6 percent, compared to 105.3 percent in the second quarter of 2022. This improvement is driven by rate increases and other targeted underwriting actions to improve profitability.
The Life and Health Insurance segment reported net operating income of $8.9 million for the second quarter of 2023, compared to a net operating income of $20.2 million in the second quarter of 2022. The decrease in net operating income was primarily due to lower Net Investment Income driven by lower returns from Equity Method Limited Liability Investments, partially offset by higher rate earned on Fixed Income Securities.
Capital
Total Shareholders’ Equity at the end of the quarter was $2,512.2 million, a decrease of $158.4 million, or 6 percent, since year-end 2022 primarily driven by the net loss for the year. Kemper and its direct non-insurance subsidiaries ended the quarter with cash and investments of $220.3 million, and $460.0 million of available borrowing capacity under the revolving credit agreement.
On May 3, 2023, Kemper announced that its Board of Directors declared a quarterly dividend of $0.31 per share, or $20.2 million. The dividend was paid on May 30, 2023 to its shareholders of record as of May 15, 2023.
Kemper ended the quarter with a book value per share of $39.22, a decrease of 6 percent from $41.79 at the end of 2022. Book Value Per Share Excluding Net Unrealized Losses and Changes in the Discount Rate on Future Life Policyholder Benefits1 was $46.18, compared to $49.23 at the end of 2022.
Unaudited condensed Consolidated Statements of Loss for the three and six months ended June 30, 2023 and 2022 are presented below. | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
(Dollars in Millions, Except Per Share Amounts) |
Jun 30,
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Jun 30,
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Jun 30,
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Jun 30,
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Revenues: | ||||||||||||||||
Earned Premiums | $ | 1,166.9 | $ | 1,337.6 | $ | 2,347.8 | $ | 2,657.6 | ||||||||
Net Investment Income | 106.3 | 118.5 | 208.1 | 218.5 | ||||||||||||
Change in Value of Alternative Energy Partnership Investments2 | 0.8 | (4.9 | ) | 1.5 | (21.6 | ) | ||||||||||
Other Income | 1.7 | 0.9 | 2.9 | 3.3 | ||||||||||||
Income (Loss) from Change in Fair Value of Equity and Convertible Securities | 2.4 | (40.5 | ) | 4.1 | (68.7 | ) | ||||||||||
Net Realized Investment (Losses) Gains | (14.4 | ) | 11.0 | (8.0 | ) | 12.5 | ||||||||||
Impairment (Losses) Gains | (0.9 | ) | (4.9 | ) | 1.2 | (13.8 | ) | |||||||||
Total Revenues | 1,262.8 | 1,417.7 | 2,557.6 | 2,787.8 | ||||||||||||
Expenses: | ||||||||||||||||
